When the music stops

Nikkei 225 dropped another 469 points (3.22%) on Monday for a total lost of 11% within 3 days. However, buyers were able to keep the index above its last Friday's low of 13,981.

The run-up since October was due to the massive Yen printing by the Bank of Japan. The excessive money printing has also caused the value of Yen to drop from 79 yen : US$ 1 before the run-up to 102 yen : US$ 1 last week.

Marc Faber, “The government in Japan will continue to print money…. The yen is oversold and stocks are overbought …….. But, any time the market would drop in Japan and the yen would strengthen, there will be more money-printing.”

This is only a normal correction to its 83% run-up. As long as the US market can hold and the US$85 billion a month injection continues, assets and stocks will continue to move up.

In July 2012, Nouriel Roubini, dubbed 'Dr. Doom', was talking about a possible global 'Perfect Storm' in 2013 due to worsening debts crisis in Europe, slowdown in China and emerging markets, projected recession in US and possible confrontation with Iran.

But by early March, 2013, his view was 'short-term bullish, long-term catastrophic'. 

By end of April, 2013, he was predicting an uptick in stock prices over the next two years as the Federal Reserve continues its stimulus programme. Click 'Buy stocks while you still can' the article.

If that is going to be the case, the mega wave 1 is likely to have 9 major waves. Dow is currently in major wave (5).

I am talking about the mega wave 1 of the super wave VII. When the mega wave 2 comes, Dow can go all the way to 6547 level.

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Nikkei 225 plunged 7.32%. What's next ?

Last Thursday Japan Nikkei 225 plunged 1,143 points (7.32%) and triggered a panic sell-off in other Asian and European bourses.

23rd May

However, when the US market was able to hold with the Dow Jones Industrial average closed about overnight level (-13 points), other global bourses stabilized in the following day.

24th May

The reasons for the plunge :-

1. Some members of the Federal Open Market Committee (FOMC) expressed willingness to reduce the US$85 billion a month of asset purchases.

2. Chinese manufacture PMI (an economic indicator) dropped into contraction territory.

Japan Nikkei 225 might have taken the above reasons as an excuse for its first major correction to its bull-run from 8534 (12th October, 2012) to 15,627 (22th May, 2013), a massive 83% gain within 7 months after the Bank of Japan announced its 1.4 trillion yen injection into the Japanese economy, but the reaction of other global markets does indicate that the global equity markets are being supported by only one thing, the massive money printing by the central banks.

As long as the central banks continue with their QE programmes, there will be excess liquidity available for the stock markets. But do remember,no bull market can last indefinitely, all good things must come to an end ultimately. For me, I shall go by the chart.

Dow has completed its sub-wave vii. Sub-wave viii may take a few more days to complete, it may end around 15,100 level. The next sub-wave ix may bring Dow to 16,000 level before the 8% to 10% wave (viii) correction sets in.

After the wave (viii), there is wave (ix) to go to at least 16,000 again (forming a double top) or higher. The interesting question is whether the correction after that is the major wave (6) correction,

Or it is the mega wave 2 correction that has a worst case scenario of a 100% retracement to 6547 level, a 60% drop.

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Dow - The plunge has to wait for a while.

Marc Faber, "There is a chance that this market could behave like 1987 ....."

He was talking about the 19th October, 1987, the famous 'Black Monday' when the Dow plunged 22.6% on that day. 

If Dow were to plunge 22.6% from its current level of 15,400, we are talking about Dow dropping 3,480 points in a single day to 11,920 level.

To me, we are lucky if the drop is 22.6%. With today's computer driven 'high frequency trading', when Dow collapsed, it is going to be very much worst than that.

But it won't come so soon. Thanks to the US$80 billion per month money printing. Dow has to complete at least its wave (vii), (viii) and (ix) in the next few months. The return could be very juicy during the last euphoric surge before the plunge. 

  

Dutaland

Buyers came in very strongly in the afternoon to push Dutaland to close at 54 sen level. If the uptrend can continue tomorrow, the next up can be the mini wave vii.

Failure which, it could be a higher degree sub-wave (ii) correction that can take another 3 to 5 days to complete. 

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Dow - The rally will end very badly

Marc Faber believes the stock market in the US is overdue for a correction.

"There is a chance that this market could behave like 1987 where the market went up first 40% from January until August 25 and then collapsed by 41% in two month."

To listen to him, click ' US rally will end really, really badly '.

Black Monday, 19th October, 1987

Courtesy of www.gannglobal.com.

On that Monday, Dow dropped 508 points from 2246 (previous Friday's closing price) to 1738 for a 22.6% drop. It dropped another 122 points or 7% on Tuesday, October 20.

From the market peak of 2746 recorded on 25th August to the bottom of 1616 on 20th October, Dow dropped 1130 points or 41% within two months.

So, make sure that you are out of the market before the bubble bursts.



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Dutaland - Possible Mega wave (3)

Dutaland gained 5 sen today to close at 54.5 sen. It is a very dynamic mini-wave v (+10%) with high volume, 7.3 millions shares were traded.

By Elliott wave principles - A five waves advance indicates the direction of the major trend and in this case the overall trend is UP and it can be the mega wave (3).

Property sector is the best performed sector today with a gain of 5.24% followed by construction that gained 2.17%. Finance, plantation, consumer product and all the other sectors were up by less than 1%.

Property index is forming its sub-wave iii of wave (v) of its major wave (3).

Construction Index has to break the upper resistance at 340 level to have a strong run. If it fails to break away from the 340 level, the next high could be the major wave D.



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A season of despair and a season of hope

Lim Kit Siang :


"That is where we are at now. We are in the best of times, we are in the worst of times. We are in a season of light and a season of darkness. In the just concluded general election, we thought we could bring change and set up a new government in Putrajaya but we were robbed of this change. It was a period of hope and a period of darkness. Najib with only 47% of the popular vote is the Prime Minister but Anwar with 51% of the popular vote is not the Prime Minister. It is the sense of despair, the sense of outrage, the sense of anger .............."

"Although, there is despair there is also hope. There is also chance for maturity in the future. In particular, we see young people all over the country waking up, standing up for their rights for change in Malaysia,"

Click ' Season of despair and a season of hope ' for the article.

Rights that we will never give up

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Dow - sub-wave vii about to end

Dow Jones Industrial Average

Dow is about to complete its sub-wave vii. The next minor correction is sub-wave viii.

Dutaland Bhd

I hope the current pullback for Dutaland is the mini-wave iv as shown below.

If Dutaland can move higher than 52 sen in the next few days to form the mini-wave v, chances are high that this  mini-wave i to v is the sub-wave (i) of the major wave (3)

 

US$ 

Matthias Chang, "The issue is why has the US$ not collapsed as it should have by now ?"


Click 'Japan's Sham Currency War' for the full article by Matthias Chang.


It may be good to know that at this moment, Matthias Chang is having the view that the Final Phase of the Global Financial Tsunami will be on us very soon.



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Dutaland Bhd

A frustrating stocks in the last 3 years. A side way A-B-C-D-E major wave 2 movement with strong accumulation in the process.

From its 2009's bottom of 29 sen, it moved to 72 sen within 3 months for a 148% gain. For the following 3 years the price was being kept in a side way movement, while the stock was being accumulated.

Its stock price reached a low of 43 sen just before the 13th General Election to complete its wave E of its major wave (2).

The price closed at 50.5 sen today with comparatively higher volume.
Is this the starting of its major wave (3) ?
Only God knows.





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Next correction - an 8% or a 20% pullback ?

Toby Connor (GoldScents),
"I think there's a pretty good chance we will see the entire intermediate rally wiped out in a matter of days or even hours ............."

"My best guess is late June or early July ..............."

"I wouldn't be surprised if we collapse back to the 1350 level .........." (He was talking about S&P 500.)

Click ' Euphoria Phase turns into the Parabolic Phase' to read the full article.

A drop from 1700 to 1350 for S&P 500, it is a 20% correction. This is a much bigger correction than my projected near-term (early July) 8% to 9% wave (viii) pullback for Dow as shown below.

 

For Dow, if my wave count is correct, the 15% to 20% correction will take place after it has completed its wave (ix), that can last several months from August to end of 2013. Major wave (6) (20% correction) will only move in after that.

 

At this moment it is too early to talk about major wave (7), major wave (8) and major wave (9).

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Dow - Milestones for the short-term run

How short-term is the 'short-term run' for Dow before the bubble burst?

Assuming the current bull run from the 2009's bottom of 6547 is the mega wave 1 of the super wave VII.

At this moment it appears to me that the mega wave 1 is going to have 9 major waves, (i.e. major wave (1) to major wave (9)), for one simple reason, major wave (3) cannot be shorter than major wave (1) & (5) if mega wave 1 has only 5 major waves.

So, if mega wave 1 has 9 major waves, the 'short-term run' will end at major wave (9). Dow currently is forming its wave (vii) of its major wave (5).

My immediate interest is - How high wave (vii) can go before the wave (viii)'s 8% pullback takes place?

By now it is obvious that wave (vii) has 9 sub-waves.
Sub-wave i gained 6.4%. Sub-wave iii & v gained 8.2% and 7.8% respectively.
The average of 6.4%, 8.2% and 7.8% is 7.46%.

By assuming sub-wave vii & ix can gain an average of 7.46% (the best I can do), wave (vii) is projected to reach 16,450 level. Wave (viii) correction will then bring Dow back to 15,000 level.

After that Dow still has one more surge, the wave (ix), to complete the major wave (5).
Dow still has major wave (6), (7), (8) and (9) to go before the completion of mega wave 1.

The 'short-term run' is not really that 'short', thanks to the money printing by all the central banks.

Don't forget the "long-term catastrophic" mentioned by Roubini. 

The above projection will be modified accordingly as Dow unfold itself.


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Bursa Malaysia

Courtesy of allstarcharts.com

Nouriel Roubini, "Short-term bullish, long-term catastrophic." 

The bear has to wait for a while before the bull completes its final acts.

Similarly the Malaysian market is expected to move in tandem with the US and other Asian markets before the bubble bursts. 

FBMKLCI is expected to set new highs in its run to complete its wave 3, 4 and 5 of its major wave (5). 

The next question is which sector ?

Roubini advices investors to enjoy the short-term run while it lasts and he said, “In the short term, it's great for assets.”

When all the central banks are printing money to resolve the debt and deficit problems, the excess money is going to inflate stocks, properties and commodities.

 

In March, when everybody is focusing on the 13th GE, the property index managed to break out of its 10-year channel with the help from stocks such as Crescendo (1.78 to 2.98), Daiman (1.80 to 2.51), Guoco(0.83 to 1.27), KSL(1.60 to 2.16), Sunway(2.50 to 3.36), Tebrau( 0.90 to 1.43), UEM Land(2.30 to 3.17) ............... and others

Some Interesting Charts

Malton (56 sen)

Double bottom reversal pattern. Strong OBV (accumulation). First 2 quarters earning is 4.24 sen a share with net assets per share at Rm1.45. It has been resting on its neckline for 2 years. It put on 2.5 sen today with high volume. Is it ready to move? Minimum target is Rm1.30.

Perak Corp (Rm1.68)

A potential double bottom pattern, can be confirmed with a breakout above the neckline. It is possible that it is forming its wave (iii) of its major wave 3. 

Its 2012 earning for year ending 31/12/2012 is 38.1 sen per share with net assets per share of Rm4.68. Its last two quarters earnings are very impressive with 12.58 sen and 15.39 sen per share respectively. It is going to announce its 2013 first quarter earning before end of May. If it is another 15 sen per share, it may be able to break its neckline and can continue with its (iii) of 3's run.

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Back to stocks

If the People's Voice Rally at Kelana Jaya stadium tonight does not turn ugly, Malaysian stock market should have factored into its price the results of the 13th General Election. From now on, I would expect the market to move roughly in tandem with the world bourses especially the US market.

I always believe 'when uncle Sam sneezes, the whole world catches cold', I have to look at the Dow first to see whether there is any immediate danger before looking at the Malaysian market.

Refer to my previous posts on Dow, so far, Dow is rather well behaved. It is half-way through its sub-wave vii that is expected to be completed before end of this month.

Sub-wave viii's correction is expected to finish within 3 to 4 weeks before end of June. Next will be sub-wave ix, it will run for about 1-month to complete and that can be the end of wave (vii) too.

Wave (viii)'s correction in August is expected to drop about 8%. If wave (ix) can run for another 5 months, major wave (5) may complete in January 2014. If that is also the end of mega wave 1, watch out for the mega wave 2's correction and the possibility of 100% retracement. The mega wave 2 may take more than a year to complete.

So, from now until January 2014, Dow is not expected to have any serious pullback except the 8% correction for wave (viii).

However, if mega wave 1 has 9 major waves, after completing the major wave (5) the next pullback is major wave (6) and not the mega wave 2. This is possible as long as the central bankers continue to print money out of thin air.

 People's Voice Rally

Malaysiakini reported a 120,000 crowd at the Kenala Jaya stadium.

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Perak State Assembly

Is there anything wrong ?

State Assembly Seats Won

BN 31 : 28 Pakatan

Votes Received

BN 507,247 : 627,696 Pakatan

                      43.97% : 54.42%

(Total votes casted = 1,153,518)

There must be something wrong with the system.

BN has won 4 of the seats, namely Lubuk Merbau, Manjoi, Manong and Pasir Panjang with small majorities of 53 votes, 132 votes, 231 votes and 304 votes respectively. 

Click this article by Bridget Welsh, ' Disturbing questions surrounding GE13 polling ' for possible answers.

'Apa lagi Cina mahu ?'

This is today's headline of Utusan Malaysia.

!#*@!&%?#?*&*!#F*%?#&!

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What types of Tsunami ?

Ah Jib Gor, " It is a Chinese Tsunami."
Uncle Lim , "No no no, it is a Malaysian Tsunami."
BooSu-Lyn, " It is more of an Urban Tsunami."

I think it is more of an urban tsunami. If it was a Malaysian tsunami, the one that was taking the oath of office before the Yang di-Pertuan Agong should have been Anwar Ibrahim. However if Ah Jib Gor failed to resolve some of the issues raised by Pakatan, there may be a real 'Malaysian Tsunami'.

Lim Guan Eng, "Pakatan should be the legitimate winner."

Parliament Seats Won

BN 133 : 89 Pakatan

                           (60% : 40%)

Votes Received (million)

BN 5.237m : 5.623 Pakatan

                        (47.3% : 50.8%)

(Total votes casted = 11.054 millions)

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What to say ?

BN 133 : 89 Pakatan 

Very Happy that

Lim Kit Siang (DAP) 

won the Gelang Patah Parliamentary seat  

by a majority of 15,758 votes

Nurul Izzah (Keadilan)

 retains her Lembah Pantai Parliamentary seat

by a slight majority of 1,847 votes

Rafizi Ramli (Keadilan)

won the Pandan Parliamentary seat

by a 26,729-vote majority

 And Ibrahim Ali (Perkasa)

lost his  Pasir Mas seat

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